unit’s fair value less costs to sell and its value in use and is determined for an
individual asset unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets.
Where the carrying amount of an asset or the cash-generating unit (CGU)
exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset. In determining fair value less costs to sell, recent market transactions
are taken into account, if available. If no such transactions can be identified, an
appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on inventories,
are recognized in the statement of financial performance in those expense
categories consistent with the nature of the impaired asset.
For assets, an assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer exist or
may have decreased. If such indication exists, the LGUs estimate the asset’s or
cash-generating unit’s recoverable amount. A previously recognized impairment
loss is reversed only if there has been a change in the assumptions used to
determine the asset’s recoverable amount since the last impairment loss was
recognized. The reversal is limited so that the carrying amount of the asset does
not exceed its recoverable amount, nor exceed the carrying amount that would
have been determined, net of depreciation, had no impairment loss has been
recognized for the asset in prior years. Such reversal is recognized in surplus or
deficit.
Impairment of non-cash-generating assets
The LGUs assess at each reporting date whether there is an indication that a non-
cash-generating asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required, the LGUs estimate the asset’s
recoverable service amount. An asset’s recoverable service amount is the higher
of the non-cash generating asset’s fair value less costs to sell and its value in use.
Where the carrying amount of an asset exceeds its recoverable service amount,
the asset is considered impaired and is written down to its recoverable service
amount.
In assessing value in use, the LGUs adopted the depreciation replacement cost
approach. Under this approach, the present value of the remaining service
potential of an asset is determined as the depreciated replacement cost of the
asset. The depreciated replacement cost is measured as the reproduction or
replacement cost of the asset, whichever is lower, less accumulated depreciation
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